Barclays increases ABN bid and reports 12% profit increase

by Gill Montia

Story link: Barclays increases ABN bid and reports 12% profit increase

The bidding war for ABN Amro continues with Barclays increasing its offer for the Dutch bank after having secured substantial backing from China Development Bank (CDB) and Temasek.

The new partners, which are owned by the governments of China and Singapore respectively, are buying £2.5 billion worth of new Barclays’ shares and will have an option to purchase another £6.6 billion worth, if the ABN takeover succeeds.

This could result in CDB holding an 8.5% share of the enlarged bank while Temasek could hold 3%.

The new financing agreement has enabled Barclays to increase its offer for ABN to €68.5 billion, which is still some way behind the €71 billion bid from a rival consortium led by Royal Bank of Scotland (RBS).

However, it has also allowed Barclays to better compete with the RBS bid by providing a cash element of almost €25 billion in the offer.

The new finance will also be used by Barclays to fund a buyback of its own shares, of up to £2.4 billion.

The move is aimed at reassuring existing shareholders who may feel that their holding is being diluted by the new investors.

Putting aside the ABN acquisition, the agreement with CDB is also expected to provide Barclays with unprecedented access to Chinese businesses.

This news will sit comfortably alongside the bank’s report of a 12% increase in profit in the first six months of 2007.